Bressler Risk Blog

“Patent Examiner Pays $500K for Financial Conflicts — But the Real Story may be Systemic” —

• “A USPTO patent examiner has agreed to pay $500,000 to resolve allegations that she examined patent applications from companies in which she held substantial stock positions. The settlement, announced by the Department of Justice on February 25, 2026, resolves allegations against Daxin Wu, who allegedly worked on at least nine patent applications submitted by companies in which she held financial interests between January 2019 and May 2022. The dollar amounts are striking. Wu allegedly reviewed applications for companies in which she owned more than $300,000 and $140,000 worth of stock, respectively. She also allegedly reviewed applications from commercial competitors of a company in which she held more than $900,000 in stock. These holdings dwarf the regulatory de minimis thresholds that permit patent examiners to hold limited stock positions in companies whose applications they review. Under 5 C.F.R. § 2640.202, an examiner may hold up to $15,000 in stock in a single company whose application they are reviewing, or up to $25,000 in aggregate across companies within the industry sector covered by their art unit. Wu’s alleged holdings exceeded these thresholds by orders of magnitude.”
• “The Wu case did not emerge from a vacuum. Two years ago, the Commerce Department’s Office of Inspector General issued a report concluding that the USPTO and the Department of Commerce ‘did not effectively administer the Department’s ethics program to protect against potential conflicts of interest by patent examiners.’ U.S. Dep’t of Commerce, Office of Inspector General, The Department Needs to Strengthen Its Ethics Oversight for USPTO Patent Examiners, Final Report No. OIG-24-013-I (Feb. 14, 2024). That report, triggered by hotline referrals, found systemic failures at every level of the ethics oversight process. The OIG sampled 73 examiners and found that 26 had potential financial conflicts that ethics officials failed to identify. Projecting those results across the roughly 7,000 examiners required to file confidential financial disclosure reports, the OIG estimated that approximately 2,100 patent examiners (about 30%) had potential financial conflicts that went undetected in calendar year 2022.”
• “The Wu settlement appears to be the first public enforcement action arising from those referrals. The OIG report noted that it ‘referred potential violations of law ‘ to the Office of Investigations. The timeline aligns: Wu’s alleged conduct covers 2019 through May 2022, and the hotline referrals began arriving in March 2022. The investigation then took roughly four years to produce yesterday’s civil settlement.”

“Trump’s first solicitor general turns on him in $5 billion JPMorgan ‘debanking’ case” —

• “He developed a reputation as a battler for difficult causes. Against all odds, he managed to defend the so-called ‘Muslim ban’ at the Supreme Court. No wonder he is in demand since becoming a partner at Jones Day. Court filings obtained by [Washington Examiner] Secrets show that he is one of the lawyers defending JPMorgan Chase and Jamie Dimon, its chief executive, against accusations that it ‘debanked’ a client for his political beliefs. That client is his former boss.”
• “Francisco may once have been the fourth-highest ranking lawyer in the Trump administration but now he is the latest figure to have switched sides. Along with his firm, which earned millions of dollars from the 2016 Trump campaign, he provided dozens of lawyers for the administration, which took his side as the then-president fought to overturn the 2020 election.”
• “‘There is no other legal firm more clearly aligned with Trump personally and the wider MAGA movement in general,’ said a Secrets legal source. ‘They revel in it.'”
• “Trump’s allies are fuming. They accuse Jones Day of a conflict of interest and claim that lawyers such as Francisco have intimate insider knowledge of the Trump legal playbook, which they say should be kept far from the case.”
• “‘Isn’t there a conflict of interest given that the President has been represented by Jones Day??’ posted Laura Loomer, the rightwing influencer, who was the first to ask the question.”
• “Trump is suing the bank and its CEO for $5 billion. But it is the names of the lawyers in the court filings that have particularly rankled in Trumpworld, where loyalty is everything.”
• “Other filings last week spotlighted Francisco as one of the lawyers on the case. The name of another key player will also ring bells with longtime Trump watchers: Eliot Pedrosa was plucked from Jones Day in 2018 for a top role with the Inter-American Development Bank, pushing the administration’s hard-line anti-socialist policy in the region. Now he is back with the firm and working against his former boss.”
• “Jones Day inserted itself deeply into the first Trump administration, providing a string of key staff for the White House and Justice Department, and then representing the Trump campaign in suits around the 2020 election.”
• “Mike Davis, a former legal adviser to Trump, said he was shocked that it had taken a case against Trump. ‘The law firm Jones Day, which represented Trump, is now adverse to him in the JPMorgan debanking lawsuit, he told Steve Bannon’s War Room. ‘They know his mindset, strengths, weaknesses, negotiation limits, and confidential information. Taking an adverse client puts them on very treacherous ethical ground.'”
• “That still allows sufficient room for Jones Day to represent JP Morgan, said Cassandra Robertson, a law professor at Case Western Reserve University, unless the firm had previously worked on a matter closely related to this case.”
• “Nor was it enough to say that the firm or figures such as Francisco had insider understanding of the Trump legal strategy in order to get them thrown off the case.”
• “‘That would be called the playbook strategy in legal ethics terms, that somebody represented a party long enough to know their entire legal playbook, which then would be potentially disadvantageous,’ she said.”
• “‘That was kind of a popular theory of conflicts, maybe 20 or 30 years ago,’ Robertson said. ‘At this point, most courts have said that the idea of a playbook conflict is not enough.'”

“Court slashes lawyers’ $510M contingency fee in $10B Robinson Huron settlement to $40M” —

• “The Ontario Superior Court has slashed legal fees for the lawyers who obtained a $10-billion settlement for certain First Nations under the Robinson Huron treaty, reducing their compensation from $510 million to $40 million.”
• “In Nootchtai v. Nahwegahbow Corbiere Genoodmagejig Barristers and Solicitors, 2025 ONSC 6071, released on Oct. 29, Justice Fred Myers ruled that the $510-million claimed by counsel based on a partial contingency fee agreement would amount to a windfall of huge fees unrelated to the value of services rendered.”
• “‘A lawyer’s professional retainer is not a lottery ticket offering a bonus prize of generational wealth to the lawyers if the clients hit the jackpot and win a mega-award,’ the judge wrote.”
• “In June 2023, the Crown agreed to pay $10 billion to settle claims brought by Robinson Huron Treaty First Nations for breach of the 1850 Robinson Huron treaty. Under the treaty, the Crown agreed to make annual payments to the First Nations and their members in perpetuity, with the amount to increase over time as revenues from the territory grew.”
• “However, the annuities were frozen at $4 per person for almost 150 years in what the Supreme Court described as ‘a mockery of the Crown’s treaty promise to the Anishinaabe of the upper Great Lakes.'”
• “The six-member legal team for the First Nations claimed $510 million as fees under a partial contingency fee agreement.”
• “In April 2024, the chiefs and trustees of the Robinson Huron Treaty Litigation Fund voted to approve the legal team’s proposed $510-million fee after the lawyers offered to gift back half to the fund. The legal team was subsequently paid $255 million.”
• “Two of the 21 First Nations opposed approval of the fees.”
• “The applicants — Gimaa (Chief) Craig Nootchtai on his own behalf, and on behalf of Atikameksheng Anishnawbek First Nation, and Ogimaa Kwe (Chief) Karen Bell and Councillor Chester Langille on their own behalf, and on behalf of Garden River First Nation — sought a review of the legal fees.”
• “They submitted that the fees must be reduced despite approval by the fund trustees and chiefs as they were too high.”
• “Justice Myers noted that the issue before the court was whether the $510-million fee claimed by the legal team under a 2011 partial contingency fee agreement was fair and reasonable or if it amounted to unlawful ‘champerty.'”
• “Champerty is the purchase of a stake in a lawsuit without a legitimate interest in the case, and is illegal in Ontario.”
• “Under the 2011 agreement, the six-lawyer legal team agreed to bill at 50 per cent of their normal hourly rates in exchange for a contingent success fee of 15 per cent on the first $100 million recovered and five per cent on any amount above that. The agreement did not, however, cap the total fee and also required the First Nations to fund all disbursements.”
• “The legal team also engaged roughly 40 other lawyers, all of whom billed the fund at their standard hourly rates.”
• “‘As a result of the leverage employed by the Legal Team, using juniors and others (including at least one Queen’s Counsel) all billing at full fees, the 50 per cent discount on the fees of the members the Legal Team did not amount to a 50 per cent discount on the cost of the litigation,’ Justice Myers noted.”
• “The court observed that the discount on the hourly rates of the legal team amounted to about a 25 per cent discount on the $23 million billed by all the lawyers working for the legal team. ‘With disbursements of another $6.5 million paid by the clients, the Fund was bearing over 80 per cent of the financial load of the litigation,’ the judge wrote.”
• “The court also observed that the chiefs of the First Nations involved and their negotiating committee did not consult independent counsel about the risks and benefits of the contingency fee agreement. Justice Myers also noted that the legal team did not suggest or insist that the fund or the chiefs obtain independent legal advice.”
• “The judge found that the chiefs did not fully appreciate the nature of the agreement and believed that the deal was in return for the lawyers bearing 50 per cent of the projected litigation cost.”
• “Justice Myers calculated that dividing the $510,000,000 by 65,000 hours would yield an average hourly billable rate of more than $7,800 per hour, or about $3,900 per hour if the court considered $255 million as the amount claimed for legal fees.”
• “‘Those rates would be a windfall that bear no relationship at all to the chargeable value of legal services in Ontario whether in 2007 or today,’ the judge wrote.”
• “The judge cited Fresco v. Canadian Imperial Bank of Commerce, 2024 ONCA 628, in which the Ontario Court of Appeal observed that lawyers charging excessive fees beyond what is fair and reasonable undermines the integrity of the legal profession.”
• “Justice Myers noted that the amount of the settlement in the case at bar was so big that the percentage recovery guideline often used in contingency fee review must be discarded to avoid an unseemly, disproportionate, champertous windfall to the lawyers.”

For those interested in financial news, Matt Levin’s newsletter is an unparalleled combination of education, insight, and amazing writing. Here’s a relevant portion from last week:

• “We have talked a few times about Optimum’s lawsuit against its lenders. Optimum Communications Inc. would like to restructure its $26 billion of debt, and it would like to do this in the usual modern way, a ‘liability management exercise’ (LME) pitting its lenders against each other to try to extract concessions out of them. The lenders, though, weren’t having it: The holders of most of Optimum’s debt got together and signed a ‘cooperation agreement,’ promising not to cut any deals with Optimum unless holders of two-thirds of the debt agreed to the deal.”
• “That is, if you think about it, a bit weird: If a bunch of competing firms get together and sign an agreement to coordinate their actions and not cut prices, isn’t that an antitrust problem? One person who thought about it was David Nemecek, a lawyer at Kirkland & Ellis who has led a lot of big liability management exercises, and who said at a Bloomberg conference last year that ‘people who enter into cooperation agreements should be careful’ because of ‘the potential for antitrust claims.’ “
• “That was just some public musing about an untested theory, but in December Optimum actually tried it out, suing its lenders and alleging that ‘the cooperative is a classic illegal cartel.’ Kirkland & Ellis represented Optimum in its liability management, but it did not file the lawsuit. Nonetheless, ‘creditors believed Kirkland had been behind the lawsuit,’ because of Nemecek’s public musings and his general aggressive LME work. Many of the creditors in the alleged cartel were big alternative asset managers and important Kirkland clients, and they apparently complained to Kirkland: It is a bad look to accuse many of your big clients of being antitrust criminals, and the clients ‘raised the issue to Kirkland’s executive committee.'”
• “And then (1) Kirkland stopped representing Optimum in January and (2) Nemecek left Kirkland for Simpson Thacher & Bartlett this month. ”
  “Which is, if you think about it, even weirder. When Kirkland dropped Optimum, I wrote: ‘I don’t want to say ‘they all got together and agreed to boycott everyone involved in the lawsuit,’ but,’ and then quoted the Financial Times story about the client pushback. I added: ‘I feel like Optimum’s (remaining) lawyers might want to add this to the lawsuit.’ I don’t think it proves any sort of antitrust conspiracy, but Optimum’s story here is something like ‘our lenders have joined together in a powerful cartel that prevents anyone from trading except on their terms,’ and the lenders getting Optimum’s lawyers to quit does kind of fit with that story.”
• “Optimum’s lawyers did add it to the lawsuit. Bloomberg’s Chris Dolmetsch, Reshmi Basu and Irene Garcia Perez report today:”
  • “Optimum Communications Inc. said a top law firm’s withdrawal from representing it under pressure from Apollo Global Management, Ares Management, Oaktree Capital Management and others showed that they were participating in a cartel against it.”
  • “Optimum, previously known as Altice USA, sued the credit arms of those private equity giants and other creditors in November, saying they had formed an ‘illegal cartel’ to freeze it out of the US credit market. In a revised complaint filed Wednesday, the telecommunications firm said ‘the antitrust conspiracy has only intensified’ in the last three months.”
  • “‘When Optimum sued, Defendants began searching for a way to retaliate,’ said Optimum, which is controlled by billionaire Patrick Drahi. ‘They soon found a target: Optimum’s transaction counsel, Kirkland & Ellis LLP.’ …”
    “‘Defendants’ success in bullying Kirkland served the Cooperative’s core aim – obstructing Optimum’s access to the credit markets – while showing the lengths to which Defendants will go to protect their scheme,’ Optimum said in the amended complaint.”
• “Here is the revised complaint, which includes this passage:”
  • “As one leading commentator put it, Defendants were angry that Optimum sued them for their illegal group boycott, so they ‘all got together and agreed to boycott everyone involved in the lawsuit.'”
• “Sort of? That’s me, I’m the leading commentator, but what I actually said was ‘I don’t want to say ‘they all got together and agreed to boycott everyone involved in the lawsuit,’’ which is not quite the same thing as saying ‘they all got together and agreed to boycott everyone involved in the lawsuit.’ In some technical sense it’s the opposite, though in a more colloquial sense I take their point. In any case I did say they should add it to the lawsuit so this serves me right.”
• “Incidentally I remain pretty sympathetic to the creditors here. As I wrote when the case was filed, ‘there is something off-putting about this whole [LME] process, a broad norm of ‘distressed companies should have to treat all of their creditors the same’ seems fine, and if all the creditors want to get together and agree on that then who am I to complain.'”
• “One way to think about it is that, when they make lending or trading decisions, these creditors are competitors with each other, but in their capacity as existing lenders to Optimum, they are something different. Ares and Apollo and Oaktree are not, now, competing with each other to make loans to Optimum; they are already Optimum lenders, already part of the company’s capital structure, already in a loose sense co-owners of Optimum. [2] They can get together to make decisions about Optimum’s debt, in the same way that multiple venture capitalists can be on the board of the same private company and meet to make decisions about the company. [3]”
• “As the lenders put it in their motion to dismiss the lawsuit (citations omitted):”
  • “Antitrust law protects competition — not a borrower’s desire for leverage in renegotiating its liabilities in times of distress. That is why every court that has addressed antitrust challenges to creditor cooperation has held that the antitrust laws do not reach the challenged conduct. ‘[T]hin to the point of invisibility,’ ‘border[ing] on the frivolous,’ ‘the very opposite of price-fixing.’ That is how courts in the past 50 years have characterized such antitrust claims—and they are right. …”
  • “Leveraged financing exists because risk is shared across many sophisticated lenders and bondholders, and the governing agreements hardwire collective action through voting thresholds, class votes, and consent rights. Plaintiffs acknowledge that so-called ‘liability management exercises’ (‘LMEs’) are ‘a creature of contract,’ often pitting creditors against one another to ‘create individual winners and losers.’ The creditor cooperation alleged here is a permissible response to that dynamic. It prevents opportunistic maneuvers that reward certain creditors at the expense of others; it reduces transaction costs and the destructiveness of brinkmanship; and it promotes the very mutual forbearance that can keep a borrower operating while preserving the contractual expectations that made the original financing possible. In short, the cooperation Plaintiffs attack is not merely lawful—it is procompetitive, and it benefits borrowers and consumers alike.”
• “Still weird to make their lawyers quit though.”

“Judge rules howitzer applicant’s attorney can stay on case” —

• “The administrative law judge overseeing the Adirondack Park Agency’s upcoming adjudicatory hearing for a proposed howitzer testing range in the town of Lewis ruled on Friday that the applicant’s attorney and law firm will be allowed to remain on the case.”
• “The decision denied a challenge from Adirondack Council, an environmental conservation advocacy group — a party to the hearing — which is opposed to the proposed howitzer range. Adirondack Council asked that attorney Matthew Norfolk, who represents project sponsor Michael Hopmeier, through his company, Unconventional Concepts, Inc., be removed from the hearing process.”
• “Adirondack Council contended that Norfolk and his firm, Norfolk Beier, should have been disqualified because of a conflict of interest stemming from the firm’s hiring of attorney Sarah Reynolds in May 2025. Reynolds previously worked as an associate counsel for the APA, and had been involved in the agency’s handling of the howitzer matter. Norfolk submitted a seven-point rebuttal for Administrative Law Judge David Greenwood to consider. More on Adirondack Council’s motion, along with Norfolk’s objection, can be found at [here].”
• “No other parties, including the APA, submitted material on the matter. Greenwood originally wrote that he would rule on this by Feb. 10. It was unclear what caused the delay, though the hearing’s start had since been pushed back until April 22.”
• “Greenwood’s 10-page ruling framed the decision as a balancing test, with the reasons against disqualifying Norfolk outweighing the reasons for doing so. He listed factors in favor of Adirondack Council’s motion as being the nature, duration and severity of the alleged conflict of interest, its potential to harm Adirondack Council’s interest as a hearing party, the hearing’s integrity and the avoidance of the appearance of impropriety going forward.”
• “Greenwood’s reasons against the motion include what he found was a lack of standing from the Adirondack Council to make the motion. This was something Greenwood said the APA would have if it had chosen to file this type of challenge. Similarly, another reason against the motion was the APA’s lack of action on this matter, which Greenwood wrote, ‘one could infer that the Agency does not feel that the conflict requires
• disqualification.'”
  “The administrative law judge also found that Norfolk Beier had implemented screening measures to prevent Reynolds from discussing or being involved in the howitzer matter in any way once she was employed by the firm. Even though he wrote that these measures were ‘imperfect,’ Greenwood said they constituted a reason against Adirondack Council’s motion to disqualify Norfolk. Another reason Greenwood listed was Reynolds’ subsequent departure from Norfolk Beier in December, stating that ‘the term of conflict has ended.'”
• “Greenwood’s final reason against disqualifying Norfolk was that removing Hopmeier’s chosen counsel would create a ‘substantial burden’ for him, given that Norfolk has represented him in the howitzer matter since the early days when it was before the APA in 2022.”
• “‘Requiring the Project Sponsor to obtain new counsel after so much time and on the eve of the public hearing commencement would be a substantial burden,’ he wrote.”
• “Greenwood cited case law that stated disqualification motions carry a ‘heavy burden and must satisfy a high standard of proof.'”
• Complete ruling: here.

“Beasley Allen Ethics Showdown Rattles J&J Talc Litigation” —

• “Lawyers nationwide are gearing up for bellwether ovarian cancer trials against Johnson & Johnson this year, but a plaintiff firm’s ethics quagmire is testing litigation management for roughly 70,000 cases in novel ways.”
• “Beasley Allen, co-lead counsel for the sprawling federal multidistrict litigation over allegedly tainted talc products, was on a hot streak. It’s won two trials in recent months against J&J after the pharma giant’s third failed effort to force a mass settlement in bankruptcy, setting the stage for further trial verdicts where the New Jersey-based health company has already lost billions.”
• “Then last month, the Alabama-based firm’s preparation for three of the six bellwether federal litigants nearing trial was undercut by a novel ruling disqualifying the firm from 435 of the roughly 2,700 cases in New Jersey state court—called multicounty litigation—raising questions about past verdicts, key experts, and who could represent the firm’s thousands of clients in the federal cases if courts apply that disqualification nationwide.”
• “Key players and experts wonder whether the fallout could delay initial trials, or potentially edge the overall litigation closer to universal settlement due to the jettisoning of one of the loudest voices against resolution through bankruptcy.”
• “‘Clearly J&J thinks this is a worthwhile thing to scream and jump around about, which tells you something about whether they are more willing to play with the remaining firms,’ said complex litigation researcher and University of Georgia Law School Professor Elizabeth Chamblee. ‘They clearly see Beasley as a hindrance.'”
• “The US District Court for the District of New Jersey has scheduled a Tuesday conference to discuss J&J’s call to toss Beasley Allen from thousands of cases due to ‘association’ with former J&J lawyer James Conlan in mediation.”
• “The firm’s attorney in this ethics dispute, Jeffrey Pollock of Pollock Law, said in a federal brief that disqualifying it ‘based on a single state appellate court’s unprecedented expansion of an ethics rule would disrupt coordinated leadership, impair settlement negotiations, and prejudice litigants who have relied on their chosen counsel for the better part of a decade.'”
• “J&J argues Conlan, a former restructuring counselor who spent hundreds of hours representing the company before leaving to start a mass torts settlement consultancy, ‘switched sides.’ A New Jersey appeals court found that collaboration in a mediation between Beasley Allen and Conlan violated a rule—one that all states have adopted in some form—limiting ‘assistance’ from nonlawyers with conflicts in a case.”
• “‘Conlan’s prolonged access to J&J’s privileged information, followed by collaborative efforts with its most prominent adversary, leaves us with clear concern for the preservation of trust intrinsic to the attorney-client relationship,’ the court said.”
• “In a February hearing urging a disqualification pause while Beasley Allen seeks reversal from the New Jersey Supreme Court, Pollock said a decision like this hasn’t been reached anywhere else.”
• “J&J’s lawyer Peter G. Verniero, a former New Jersey Supreme Court justice now with Sills Cummis & Gross PC, said demanding proof of a shared secret would eviscerate ethics protections against collusion. The company is leaning into its win, saying a Beasley Allen exit could get the litigation closer to a deal—something Beasley Allen fought when it meant going through bankruptcy.”
• “‘Beasley Allen’s disqualification for its egregious ethical violations should facilitate—not impede—the progress of this proceeding,’ Erik Haas, J&J’s worldwide vice president of litigation, said in a statement.”
• “If Beasley Allen is disqualified from the MDL, the fallout could be tough on other plaintiff firms, some attorneys involved in the litigation said.”
• “For 10 years Beasley Allen has taken the lead on developing trial testimony experts, taking depositions, and gathering evidence for use by all plaintiffs to litigate talc personal injury cases, said attorney David Selby of Bailey & Glasser LLP.”
• “‘The impact is just enormous,’ Selby said. ‘All of that has been organized and run by Beasley Allen.'”
• “One of Beasley Allen’s co-counsel is fine with ditching the firm: Allen Smith, a lawyer who has been jointly representing clients with the firm. He informed the court that he’s capable of moving forward with their thousands of cases on his own.”
• “Mississippi-based Smith Law Firm and Beasley Allen had a public falling out over Smith’s support to settle their more than 11,000 joint cases when J&J launched its third bankruptcy gambit in 2024, as both firms accused the other of betraying their clients’ interests. Beasley Allen has sued Smith, accusing the joint venture partner of failing to pay its share of litigation expenses as it racked up more than $240 million in litigation funding debt.”
• “The potential loss of Beasley Allen will only be felt acutely by firms that ‘don’t know how to work up their own experts,’ said plaintiffs’ attorney Majed Nachawati of Nachawati Law Group.”
• “‘We’re going to go forward with our cases,’ said Nachawati, who represents more than 4,000 talc plaintiffs and is gearing up for two trials. ‘We don’t need MDL leadership to try our cases for us.'”

Daniel J. Siegel wries: “Confidentiality Isn’t Just for Lawyers: Why Law Firm Staff Ethics Matter as Much as Lawyer Ethics” —

• “Recently, a trial court entered an order allowing limited discovery of a law firm’s IOLTA account in a divorce proceeding. Of course, IOLTA accounts contain confidential information, including the names of parties, settlement amounts and much more. While the order was, for the most part, reasonably tailored to preserve confidentiality—almost every identifying factor about the account was to be redacted—there were a couple of lines in the order that stopped me dead in my tracks.”
• “The judge wrote that the clients’ ‘identities were not confidential as to the staff if they were privy to them at the time they worked for the firm.’ I was shocked at the comment.”
• “Everyone knows, I thought, that confidentiality applies not only to lawyers but also to everyone who works for them, and even applies to legal assistants outside the firm. This point was made even clearer when Model Rule of Professional Conduct 5.3 was amended, as was its counterpart under the Pennsylvania Rules of Professional Conduct. Comment [3] to the Pennsylvania Rule to emphasize this point.”
• “Yet this judge misapprehended the rule and, in fact, stated that the information was confidential only to the lawyers, not to the staff. Respectfully, the court erred.”
• “Against this backdrop, I am writing to clarify the Rules of Professional Conduct regarding confidentiality and to emphasize a few points related to that concept.”
• “Lawyers consider confidentiality their professional birthright. It is one of the ingredients baked into their licenses, enforced by disciplinary boards, and hammered home every day of law school. But in the modern law firm, which often relies on so many components—in and out of the office—confidentiality is a shared ethical ecosystem.”
• “One commentator called today’s legal practice a team sport. There are so many components. Paralegals, assistants, intake specialists, billing staff, IT professionals, marketing teams, and outside vendors routinely have access to information that they would never have only a few years ago. At the same time, technology has made the transmission of information effortless, I would say too effortless in many ways. A chat message, an email, or an AI query can expose confidential information in seconds. That is why Rule 5.3 was amended, years before generative AI made information disclosure even easier.”
• “The truth is this: Most confidentiality breaches aren’t the result of bad actors or intentional misconduct. They come from a fundamental misunderstanding of the rules. Look at Pennsylvania’s Public Access Policy. It was meant—again, before generative AI—to protect confidential information. Yet lawyers often pay lip service; they check the box but don’t verify for confidential data. God knows, lawyers are still emailing medical records, still not recognizing that email is as confidential as a postcard. And they never think twice.”
• “That is why, now more than ever, it is important to consider who is bound by the rules of ethics, what ‘confidential’ really means, and where the invisible lines lie when using ever-changing modern tools. Three misconceptions, in particular, continue to create risk for firms of all sizes.”
• “Many firms train their lawyers on confidentiality. Far fewer invest the same energy in training their nonlawyer staff. This gap persists despite the fact that, ethically and practically, nonlawyer employees are extensions of the lawyer.”
• “Under the Rules of Professional Conduct, lawyers are responsible for ensuring that their staff’s conduct is compatible with the lawyer’s own ethical obligations. That means when a staff member mishandles confidential information, the lawyer—and by extension everyone in the firm—must bear responsibility.”
• “Still, many staff members view confidentiality as an abstract concept. They probably know they should not gossip. They probably know not to post client names on social media. But do they really understand that confidentiality also extends to intake calls, internal conversations, drafts, metadata, billing narratives or scheduling details? And do they realize that confidentiality extends to the fact that a particular person is a client?”
• “The risk is compounded by the reality that staff often operate at the crossroads of information. An intake specialist hears unfiltered facts before a conflict check is complete. A legal assistant may see drafts that never make it into a final pleading. A billing professional reads time entries that describe strategy, vulnerabilities or settlement posture. IT personnel may have broad system access without any substantive legal context for what they are seeing.”
• “When staff members are not taught that confidentiality is their obligation—not just the lawyer’s—they may default to their everyday norms and not their professional ones. What may be harmless in another industry becomes a time bomb in a law firm.”
  Policies do not create a culture of confidentiality. They are created by clear explanations of why these rules exist. Staff who understand that confidentiality protects clients, the firm, and their own professional standing are far more likely to treat it with the seriousness it deserves.”
• “No discussion of modern confidentiality is complete without addressing artificial intelligence. AI tools are rapidly becoming part of everyday workflows, from drafting emails to summarizing documents to brainstorming arguments. Used carefully, they can be powerful. Used casually, they can be dangerous.”
• “The core problem is not that AI is inherently unethical. It is that many users do not understand how these tools process, store or reuse information. When someone types in client details into a generative AI prompt, they may be disclosing that information to a system outside the firm’s control, subject to terms of service they have never read.”
• “The ‘elevator test’ is a useful metaphor. Doctors have long been warned not to discuss patient matters in elevators where conversations can be overheard. It is obvious why. AI warrants the same level of caution from lawyers and law firm staff. If you could not comfortably speak a sentence aloud in a crowded elevator, don’t paste it into an AI prompt, especially the more public forms of AI that make it clear there are no privacy protections.”
• “What ties these three issues together is not technology or rules. It is culture. Confidentiality failures rarely occur because someone wants to violate their ethical duty. They happen because the firm failed to train its staff or adapt its old principles to new tools.”
• “There is a solution. First, treat all staff as professionals with ethical responsibilities, not as passive support. Second, give on-point guidance. Third, acknowledge that technology changes how confidentiality is threatened, but not why it matters.”
• “Confidentiality remains one of the legal profession’s defining principles. Preserving it requires more than rules. It requires every person in the firm—lawyers and nonlawyers—to recognize and understand that ethics is not someone else’s job. It is everyone’s responsibility.”

“Conflicts of Interest in Family Law Matters” —

• “Conflicts of interest can arise in any practice area, but the personal nature of family law litigation makes it all the more important for lawyers to be careful to avoid taking on representation where a conflict of interest claim could trigger a motion for disqualification or breach of fiduciary duty claim.”
• “The rules that govern lawyer conduct with respect to conflicts of interest arise out of a fundamental attorney obligation: the duty of loyalty. For practitioners in family law, as for all lawyers, that duty dictates that the lawyer’s primary concern in any representation is to protect and further the best interests of the client. If there are other interests at play that pose a risk of adversely affecting the lawyer’s ability to advocate for the client’s best interest and/or give advice untainted by other considerations, there is a conflict of interest. And in the absence of consent or where the conflict is not consentable, a conflict of interest means that the lawyer may not take on the representation.”
• “The most basic conflict of interest rule is that a lawyer may not represent a client who is directly adverse to another client, per the American Bar Association (ABA) Model Rules of Professional Conduct Rule 1.7(a)(1). To take the most obvious example of how the prohibition applies in family law: a lawyer may not represent both spouses in a marital dissolution action. That will be true even if the parties come to the lawyer together, saying that they have already worked out financial and custody issues between them and just need assistance formalizing the agreement and putting everything into writing. In such a situation a lawyer is likely to be unable to competently and diligently advise both parties.”
• “Imagine, for example, that the lawyer sees that one or more terms of the parties’ proposed agreement is unfairly detrimental to the interests of one spouse or that the agreement somehow takes advantage of one spouse’s misunderstanding of the parties’ respective rights. In that situation, the lawyer could not properly provide clarifying advice to the potentially disadvantaged spouse because such advice would likely be contrary to the interests of the other spouse (the one who would gain an advantage). But if the lawyer were to fail to give such advice, she would be exposed to a claim by the disadvantaged spouse that the inherent conflict of interest resulted not just in legal malpractice, but a breach of fiduciary duty, a much thornier claim to defend.”
• “Rule 1.7’s prohibition of direct adversity also means that a lawyer may not represent one spouse if the other spouse is a client of the lawyer in another matter, even if the other matter is unrelated to the dissolution action. And the same is true even if it is another firm lawyer who represents the adverse spouse in the unrelated matter. That is because under Rule 1.10 (Imputation of Conflicts of Interest: General Rule), the conflict of one lawyer at a firm will be imputed to all other lawyers at the same firm.”
• “Where a conflict arises out of a law firm’s representation of adverse parties in unrelated matters, such representation may be undertaken where both affected clients provide informed consent, confirmed in writing. But it may be wiser to forgo such representation. In the emotionally fraught circumstances common to so many family law matters, even to ask for consent may cause either or both of the affected clients to doubt the lawyer and the law firm’s loyalty. As explained in the Comment on Rule 1.7: ‘the client on whose behalf the adverse representation is undertaken reasonably may fear that the lawyer will pursue the client’s case less effectively out of deference to the other client, i.e., that the representation may be materially limited by the lawyer’s interest in retaining the current client.'”
• “In addition to ensuring that a prospective representation raises no conflicts with respect to a current client of the lawyer or her firm, lawyers must also consider whether there is a conflict under Rule 1.9 (Duties to Former Clients). Rule 1.9 does not create a blanket prohibition on representation adverse to a former client. Rather, under Rule 1.9, a lawyer is prohibited from undertaking representation adverse to a former client only if the new matter is ‘the same’ as, or ‘substantially related’ to, the matter in the prior representation. Where there is a claim of a former client conflict of interest—typically raised in the former client’s motion to disqualify a former attorney from representing an opposing spouse—the dispute will usually turn on whether the former matter is ‘substantially related’ to the current divorce proceedings. The Commentary to Rule 1.9 provides this gloss: ‘Matters are ‘substantially related’ for purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.’ A leading resource for interpreting the Model Rules summarizes the development of the ‘substantial relationship’ analysis as follows: ‘Today, most courts and other authorities hold that the substantial relationship test is not a formalistic inquiry into degrees of closeness, but is in large measure a judgment as to whether former clients are at risk that their confidences will be turned against them.’ Geoffrey C. Hazard, Jr., W. William Hodes, Peter R. Jarvis, The Law of Lawyering, (4th Ed. 2018-2 Supp.) § 14.07.”
• “In marital dissolution matters, the question of whether there is a former client conflict commonly arises in the situation where a lawyer has previously jointly represented a married couple in their estate planning or in one or more real estate transactions, and later one of the spouses seeks the lawyer’s representation in the couple’s marital dissolution action. There are conflicting views about whether such ‘family lawyer’ representation is ‘substantially related’ when the couple subsequently divorces. In a 2005 opinion, the Oregon State Bar took the position that in most circumstances the joint estate planning representation does not present a conflict of interest with respect to subsequent representation of one of the spouses in a dissolution action. Oregon State Bar, No. 2005-148, Conflicts of Interest, Former Clients: Representing One Spouse in Dissolution after Joint Estate Planning (revised as of 2016). In that situation ‘it does not appear that Lawyer would be in possession of information relating to the representation of Husband that would not already be known to Wife or to which Wife would not otherwise have access,’ as is generally the case where there is a joint representation. By contrast, in a 2001 opinion, the New Hampshire Bar Association Ethics Committee, while not answering the question directly, offered a more cautious view: ‘It is likely that the potential to utilize information obtained during the prior matter will arise and place the lawyer in a position in which his or her obligation to protect a former client’s confidences conflicts with the obligation to represent the current client.’ New Hampshire Bar Association Ethics Committee, Practical Ethics Article, Conflict of Interest in Family Law Matters (2001).”
• “The analysis of whether matters are ‘substantially related’ for purposes of Rule 1.9 will necessarily turn on how the judge in any particular case views the underlying facts and particular circumstances of the case at issue. This can lead to considerable variation. For example, the Oregon State Bar’s conclusion that joint estate planning generally did not preclude subsequent representation rested in part on the premise that, in a joint representation, information is generally presumed to be shared and where that is the case, ‘no information-specific former-client conflict would exist.'”
• “Moreover, in a marital dissolution action, it is generally the case that the parties are required to make full disclosure of their income, assets, and other financial matters. The fact that financial information is discoverable in matrimonial cases should dictate against disqualification. This was the position a Connecticut trial court took in denying a disqualification motion in a dissolution action: ‘any disclosures to the attorney in the previous [real estate] matters were about the real estate itself or the parties’ respective sources of income-both topics subject to full disclosure in the present matrimonial action.’ Jensen v. Jensen, 2001 WL 1028897, at *2 (Conn. Super. Ct. 2001). But in a more recent decision, another Connecticut judge went in the opposite direction, granting a motion to disqualify the ‘family attorney’ from representing the husband in a divorce action, apparently concluding that disqualification was necessary to protect the wife’s confidential financial information. Lavey v. Lavey, 2020 WL 13907706, at *6 (Conn. Super. Ct. 2020).”
• “Once a lawyer has served as an arbitrator, mediator, or third party neutral in the course of a divorce proceeding, Rule 1.12(a) prohibits the lawyer from afterwards representing a party to the same proceeding. The concern with such representation is not one of client loyalty or protection of client confidences. As explained in the Rule 1.12 Comment, the prohibition follows from the fact that even though lawyers serving as third party neutrals do not have an obligation to protect client confidences, as Rule 1.6 requires, ‘they typically owe the parties an obligation under law or codes of ethics governing third-party neutrals.'”
• “The conflict of interest rules in the Model Rules do not expressly apply to an attorney who serves as guardian ad litem (GAL). But in many states, the code of conduct applicable to GALs dictates that a lawyer should decline an appointment as GAL in a matter if the lawyer, or someone at her firm, acted as counsel to, or has a prior relationship with, any of the parties, witnesses, or others connected with the family. See e.g. Commonwealth of Massachusetts, Standards for Category F Guardian ad Litem Investigators (in effect as of January 24, 2005), § 1.3.A (‘If the GAL has any prior or existing direct or indirect relationships with parties, their families, their attorneys, material witnesses, or someone else connected with the family, the GAL must consider whether the GAL’s impartiality is compromised as a result of these relationships’; situations in which a ‘GAL shall decline the appointment,’ include where ‘[t]he GAL or the GAL’s law firm previously advised or acted as counsel for a party, child, or other person closely aligned to a party, including but not limited to a party’s spouse, non-marital partner, or a material witness.’ (emphasis added)). Some states may permit service as a GAL under such circumstances, provided all parties are fully informed and waive any conflict. See e.g., Indiana State Office of GAL/CASA, Code of Ethics for GAL in Civil Family Law Cases (updated as of March 28, 2025), ¶ 11 (‘to avoid any actual or apparent conflicts of interest . . . GAL shall not serve on a case when GAL has been personally involved with a family or with the circumstances surrounding the case unless there is full disclosure of the potential conflict to all parties and any perceived or actual conflict is waived.’).”
• “Yet another situation that may give rise to a conflict is where a lawyer meets a prospective client and obtains information about the prospective client’s divorce matter, but the prospective client does not go on to become a client of the lawyer’s firm. The risk for the intake lawyer is that communications with the prospective client may disqualify the intake lawyer or her firm from representing a different client who, as it later turns out, is the other spouse, adverse to the prospective client who never became a client. Under Rule 1.18, ‘Duties to Prospective Clients,’ the extent of the risk will depend on the extent to which the intake lawyer received ‘disqualifying information’ from the prospective client, that is ‘information . . . that could be significantly harmful to’ the prospective client.”
• “But where Rule 1.10 would impute disqualification to all attorneys at a firm where one is disqualified due to a current or former client representation, under Rule 1.18(d)(2), imputation of the intake lawyer’s personal disqualification to other lawyers in the same firm may be avoided if: (1) the intake lawyer took ‘reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client’; (2) the disqualified lawyer is timely screened from any participation in the matter; and (3) the prospective client receives written notice.”
• “The prospective client dilemma is a commonplace occurrence in the area of family law, and the fact that many spouses facing a dissolution action will consult with multiple attorneys before choosing one increases the pool of potential conflicts. The Rule 1.18 Comment provides that ‘a person who communicates with a lawyer for the purpose of disqualifying the lawyer is not a ‘prospective client.’’ While this mean that a person who engages in that kind conduct would not be entitled to the protections of the Rule, difficulties of proof may limit the lawyer’s ability to rely on that provision in opposing a motion for disqualification.”

We always appreciate the diligent work, research, and commentary from Bill Freivogel:

Kudlacek v. Olson (Law Firm), 34 Neb. App. 83 (Neb. App. Feb. 17, 2026).

• Beneficiary of Trust sued Law Firm that represented Settlors of Trust. Beneficiary was unhappy about his rights under Trust and sued Law Firm for negligence. The primary issue is whether Beneficiary, a non-client, can sue Law Firm.
• The trial court granted Law Firm summary judgment. In this opinion the appellate court affirmed. The court ruled a non-client can sue a lawyer if the non-client was an intended third-party beneficiary of the lawyer’s work, but not if a conflict of interest for the lawyer results.
• Here, the Settlors’ expectation differed from what Beneficiary wanted. Thus, the conflict prevented non-client Beneficiary from suing Law Firm. Heavy reliance on Nebraska precedent.

Paciorkowski v. Jetson Elec. Bikes LLC, 2026 WL 438086 (N.J. App. Div. Feb. 17, 2026).

• Plaintiff attempted to be both a class representative and class counsel in a case involving allegedly defective electric bikes. The trial court denied class certification.
• In this opinion the appellate court affirmed, holding that Plaintiff could not be both, except “in certain public interest litigations.” No such “public interest,” here.

Lake v. Brennan, 2026 WL 401197 (M.D. Pa. Feb. 12, 2026).

• Plaintiff is suing City and a number of city-related individuals involving an allegedly improper petition for conservatorship for Plaintiff’s property. Law Firm appeared for City and the individuals.
• Plaintiff moved to disqualify Law Firm claiming that multiple representation was a conflict. Defendants raised Plaintiff’s lack of standing to make the motion. The court discussed standing in the Third Circuit at length.
• The court said because the law on standing is “not clear,” it would assume “arguendo” that Plaintiff had standing. Then, in a routine analysis, not worth pursuing here, the court found no conflict.

Bova v. Twp. of Jackson Planning Bd., 2026 WL 294936 (N.J. App. Div. Feb. 4, 2026).

• Planning Board approved construction of a private school. Plaintiffs (adjoining land owners) sued to overturn the approval.
• One objection was the lawyer (“Lawyer”) for the school/applicant had a relationship with the chair of the planning board (“Chair”).
• The relationship was this: Chair belonged to a synagogue (not a party here). Lawyer represented the synagogue before the township zoning board (different board from Planning Board).
• The trial court upheld the Planning Board’s approval of the private school project, finding the conflict argument “far too remote” to find a conflict. In this Opinion the appellate court affirmed. [Our note: The appellate court did discuss snippets of evidence suggesting Lawyer and Chair were pals of sorts, but said the trial court did not abuse its discretion in rejecting the conflict argument.]

Deel, Inc. v. People Center, Inc., 2026 WL 313505 (Del. Super. Ct. Unpub. Feb. 5, 2026).

• Plaintiff moved to disqualify law firm for Defendant (“Law Firm”) because Law Firm and Plaintiff had earlier contacts about Law Firm representing Plaintiff in a matter arguably related to this case.
• In this unpublished opinion the trial court denied the motion, primarily because Law Firm had erected a screen between the lawyer who contacted Plaintiff and the rest of the firm, in compliance with Delaware Rule 1.18.

“Beasley Allen Fights DQ Order: ‘You Need to Hit Pause for Now’” —

• “A federal judge in New Jersey plans to hear arguments next week on whether to disqualify Beasley Allen, one of the lead plaintiffs’ firms, from the talcum powder multidistrict litigation against Johnson & Johnson.”
• “In a Feb. 9 order, U.S. Magistrate Judge Rukhsanah Singh, of the District of New Jersey, ordered supplemental briefing after a New Jersey appeals court found that Beasley Allen should be disqualified from talc lawsuits because principal Andy Birchfield had partnered with a former Johnson & Johnson attorney to negotiate a proposed $19 billion settlement. Beasley Allen, which claims to represent 435 women in New Jersey state courts, and 5,500 in the multidistrict litigation, has argued to hold off the disqualification to give time to appeal the New Jersey Appellate Division’s Feb. 6 order to the New Jersey Supreme Court.”
• “‘My view is, judge, you need to hit pause for now—just briefly,’ Jeffrey Pollock, of Pollock Law in Trenton, New Jersey, told Law.com for Birchfield and Beasley Allen. ‘The reason being is let’s assume that the appellate division agrees with me, and the Supreme Court agrees with me that Beasley Allen is not out. You rearrange all the deck chairs in the MDL because we’re out, then have to do it all over again.'”
• “Johnson & Johnson, however, has suggested replacing Beasley Allen, whose principal Leigh O’Dell serves as co-lead counsel in the multidistrict litigation, with R. Allen Smith, of The Smith Law Firm, who obtained the first-ever talc verdict in 2013.”
• “‘In fact, in the majority of the Beasley Allen cases that have proceeded to trial since the inception of the litigation, Allen Smith served as lead trial counsel, devising the trial strategy, taking the examinations of nearly all experts, and handling nearly all openings and closings,’ Johnson & Johnson attorney Kristen Fournier, of Kirkland & Ellis in New York, wrote in a Thursday letter to Singh. ‘As such, the disqualification of Beasley Allen should not cause significant disruption to Beasley Allen’s clients (or this MDL) as one of their current attorneys, with significant trial experience and access to expert resources, can continue to represent them.'”
• “‘There is no need to ‘secure substitute counsel’ to replace Beasley Allen, nor is there any risk that denial of a stay of Beasley Allen’s disqualification will ‘irreparably prejudice’ the talc clients,’ he wrote. ‘I, through SLF [Smith Law Firm] will continue to represent the talc clients without disruption or prejudice.'”
• “The potential disruption to the existing talc cases would be ‘real and potentially irreversible,’ Pollock wrote in a Thursday motion, noting that Beasley Allen represents three of the six bellwether plaintiffs teed up for trials in the multidistrict litigation, which involves 67,000 talc cases.”
• “‘Disqualifying nationally selected MDL co-lead counsel based on a single state appellate court’s unprecedented expansion of an ethics rule would disrupt coordinated leadership, impair settlement negotiations, and prejudice litigants who have relied on their chosen counsel for the better part of a decade,’ Pollock wrote in a Thursday motion.”
• “As to the multidistrict litigation, Johnson & Johnson, pushing for disqualification, cited a joint venture agreement between Montgomery, Alabama’s Beasley Allen and the Smith Law Firm, based in Ridgeland, Mississippi, that would alleviate much of the disruption caused by the disqualification order. The firms share 11,000 talc clients.”

“Talcum Law Firm Accuses Litigation Funders of ‘Pirating’ Cases” —

• “A Mississippi-based plaintiffs’ firm accused three large investment firms of fraudulently inducing it to enter into two loan agreements on false grounds for talcum powder litigation. The Smith Law Firm filed suit Wednesday [2/11] against Ellington Financial, ICG Investments, and Stifel Financial alleging that funders misrepresented the availability of funds for a second tranche of a multi-million-dollar loan and conspired to gain control of the firm and its talcum powder litigation.”
• “‘The Defendants have executed what is commonly referred to as a ‘loan to own’ scheme,’ counsel for Smith Law firm at Carner & Rosemon wrote in the amended complaint filed in US District Court for the Southern District of Mississippi. ‘From the outset the Defendants conspired to defraud SLF knowing that this fraud would most likely result in SLF defaulting on its SLF1 loan interest payments and quarterly talc expenses which would allow the Defendants to pirate the SLF case fees.'”
• “According to the complaint, the three institutions provided loans to the firm for ‘tens of millions of dollars.’ The loans funded the law firm’s operations and supported the firm’s involvement in long-running litigation against Johnson & Johnson alleging its baby powder was tainted with cancer-causing asbestos. Smith Law says it brought the first case that went to trial in South Dakota in 2009. J&J denies allegations that its talc products caused cancer.”
• “It is now a multi-district litigation and faces more than 73,000 suits from consumers who blame baby powder for their cancers.”
• “After the talcum powder litigation was delayed by multiple bankruptcies filed by Johnson & Johnson, Smith Law says it submitted a request to draw on the second portion of the loan, around $30 million, but was denied. The firm could not meet its required cash interest payments due on the first loan and was put in default, they wrote in the complaint.”
• “Smith Law further alleged that the funders only included the $30 million tranche to artificially increase the overall size of the loan so it could be placed in a Collateralized Loan Obligation, which is a structured security that bundles lower-rated corporate loans and sells them to investors.”
• “The three investment firms manage billions of dollars and litigation finance is only a portion of their portfolio. Stifel is a global wealth management and investment banking company that manages over $550 billion in client assets. ICG is an alternative asset manager with $127 billion in assets under management. Ellington acquires and manages mortgage-related, consumer-related and corporate -related financial assets and has $18.2 billion in assets under management.”

“How to buy a law firm if you’re not allowed to buy a law firm” —

• “When Cohen & Gresser, known for defending white-collar criminals such as Sam Bankman-Fried and Ghislaine Maxwell, hired bankers to sell a stake in itself to private equity, it turned heads in the US legal profession. Outside investors are barred from owning law firms in most US states, including New York where Cohen & Gresser is based, under professional ethics rules designed to prevent commercial considerations from tainting legal advice.”
• “The complex financial structure that provides private equity with a workaround is inevitably coming to law, Larry Gresser said, and he wants the law firm he co-founded to be the most prominent so far to snag a deal from a buyout group.”
• “‘This is a moment of both uncertainty and opportunity,’ he told the FT. ‘One major benefit of the new structure is that the law firm can offer partners equity that will increase in value as the enterprise grows, thereby encouraging partners to think and act in the longer-term interest of the firm.'”
• “So, how exactly can you buy a law firm if you are not allowed to buy a law firm? The answer is that the law firm gets split into two parts: one entity, fully controlled by lawyers, that provides legal advice to clients, and a second, called a management services organisation, that houses technology and other back-office assets and all the non-lawyer staff.”
• “The MSO sells services back to the other side of the business in exchange for fees that are large enough to make the entity profitable, and it is the MSO that sells an ownership stake to private equity. That way, private equity does not fall foul of the American Bar Association’s Rule 5.4, which says non-lawyers cannot be in the business of law and firms cannot share fees with non-lawyers.”
  A diagram showing how institutional investors and law firm partners invest through a management services organisation, which provides services to a separate law firm under a services agreement.”
• “‘Investors are trying to fine-tune the structure and get a handle on what exactly constitutes legal work,’ said Austin Maloney, a lawyer at Hunton Andrews Kurth, which advises private equity. ‘The goal is to perform as many services as possible in the MSO. No investor is going to sign up to this if they can’t get the right amount of juice out of it.'”
• “The MSO structure has been used by a handful of small US firms over the past 20 years, and concentrated in those specialising in personal injury cases, but interest has exploded in recent months. There appear to be several reasons. Private equity has swept through the US accounting sector in the past five years, leaving law the last frontier in professional services.”
• “Private equity and their advisers are beginning to get confident about extracting significant amounts of a law firm’s value by shifting more assets into the MSO, potentially expanding the number of firms that could make a deal add up.”
• “‘We ask, how much does an outsourced marketing firm charge? An IT service provider? We iterate and iterate until the economics and the ethics align,’ he said. ‘The brand licensing is the big variable. If Kirkland & Ellis were ever to do this, how much of its value is in the brand? Is it 10 per cent? Or 20 per cent? It’s an interesting question, right?'”
• “It remains unclear what different state bar associations might think about all the potential variations — one reason major private equity firms are treading warily, and advisers caution the explosion of interest may not ultimately translate into deals. There is also a potential complication from draft legislation under consideration in Illinois, which would ban MSOs from directly and ‘indirectly’ sharing fees.”

“How Private Equity Is Challenging the Traditional Future of Law Firm Ownership” —

• “Advocates argue that small and mid-sized law firms often lack capital for technology, expansion, or operational improvements. Outside investors can address this gap and introduce operational discipline from other industries. Some also note generational shifts: younger lawyers with higher debt and fewer partnership opportunities may prefer stable employment models over traditional equity tracks, though this may reflect limited options rather than true preference.”
• “Skeptics raise significant concerns. Private equity firms typically operate on holding periods of three to seven years, which may conflict with the long-term relationships and reputational investments essential to successful practices. There are questions about the impact on client relationships and firm culture when owners prioritize exit strategies.”
• “The healthcare sector provides a cautionary example. Research has linked private equity ownership to increased costs, higher complication rates, and reduced staffing levels. A 2023 JAMA study found that private equity acquisition of hospitals was associated with a 25% increase in hospital-acquired adverse events. While legal services differ from healthcare, the tendency to prioritize short-term gains over service quality is a relevant consideration.”
• “Questions about who benefits from efficiency gains also deserve attention. If an MSO reduces costs but maintains the same charges, the savings are distributed to investors rather than partners or clients. Separating operations from the firm also complicates data protection, conflict checks, and regulatory compliance. The UK experience included notable ABS failures that required regulatory intervention.”

“Ex-client sues law firm King & Spalding for $1 billion over alleged malpractice” —

• “U.S. law firm King & Spalding and one of its former partners are facing a $1 billion legal malpractice lawsuit over allegations that they tried to wrest the ownership of a health care-based investment fund away from its client.”
• “White Oak Global Advisors alleged in a complaint, filed Saturday in New York County Supreme Court that former King & Spalding partner Terry Novetsky worked against its interests by secretly helping Isaac Soleimani, the then-CEO of White Oak’s health care-based fund.”
• “The lawsuit alleges that Novetsky and the law firm, while representing White Oak Global Advisors and White Oak Healthcare, worked with Soleimani ‘to craft and execute a multi-step plot to usurp control of White Oak Healthcare,’ including creating ‘pretextual litigation’ on Soleimani’s behalf. White Oak alleged that Novetsky and Soleimani communicated with each other through their personal Gmail accounts.”
• ‘The paper trail is damning,’ White Oak said in its lawsuit. It said King & Spalding’s malpractice caused it to suffer hundreds of millions of dollars in damages, as it prohibited White Oak from launching two multi-billion dollar health care funds.”
• “A spokesperson for King & Spalding did not immediately respond to a request for comment. White Oak said in its lawsuit that Terry Novetsky left King & Spalding for an unnamed law firm in 2023, where Novetsky continued the scheme. Novetsky did not immediately respond to a request for comment. The other law firm was not named in the lawsuit.”
• “White Oak said it is seeking at least $1 billion in damages, including at least $500 million in punitive damages. King & Spalding engaged ‘in an unprecedented conflict of interest and breach of fiduciary duty toward its clients,’ White Oak’s law firm Kasowitz said in a statement.”
• Full complaint: here.

“Hong Kong Tech Firm Seeks to Disqualify Morgan Lewis in Massachusetts Patent Case Involving Meta and Oakley” —

• “[A] Hong Kong-based technology company has moved to disqualify Morgan, Lewis & Bockius LLP from a federal case in Massachusetts. The dispute centers around allegations that Meta Platforms and Oakley Inc. have infringed on patents with their smart glasses technology.”
• “The tech company argues that the involvement of Morgan Lewis could pose conflicts of interest, given its ties to related industries and prior engagements… due to presumed conflicts that may arise from the firm’s prior interactions with the tech sector, potentially compromising its ability to represent its clients without bias.”
• “The patents in question involve cutting-edge innovations in smart eyewear, a rapidly evolving field with significant financial stakes. This legal maneuver highlights ongoing tensions between established tech giants and emergent firms seeking to protect their intellectual property.”

Read the motion: “MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S MOTION TO DISQUALIFY MORGAN LEWIS & BOCKIUS LLP” —

• “Morgan Lewis & Bockius LLP’s (“Morgan Lewis”) conflict-of-interest arises from its access to confidential information obtained during its representation of Kopin Corporation (“Kopin”). The personnel who founded Kopin and developed and operated its smart-glasses business unit later founded Solos Technology Limited (“Solos”). For decades, Morgan Lewis has represented Kopin, including in matters directly connected to Solos’ corporate separation. As part of that separation, intellectual-property assets underlying the smart-eyewear business were transferred from Kopin to Solos, and Kopin retained a minority ownership interest in Solos. The separation required the evaluation and transfer of the very technologies implicated in this action.”
• “Specifically, Morgan Lewis represented Kopin in a series of technology transactions through which Solos acquired the smart-eyewear technologies and associated intellectual-property rights now at issue. Morgan Lewis’ work included advising on an asset sale, patent assignment agreement, and license agreement governing the patents asserted in this litigation, as well as related patent applications and priority claims (the “Asserted Patents”). These engagements necessarily required Morgan Lewis to structure ownership, licensing, and scope of rights concerning the same technology and patent assets disputed here.”
  “Accordingly, there is substantial relationship between Morgan Lewis’ prior work for Kopin and the subject of this case. Solos need not demonstrate that Morgan Lewis is using confidential information to Solos’ disadvantage because the risk that confidential information may be used is presumed. In light of that presumption, allowing Morgan Lewis to continue to appear in this case would erode confidence in the fairness of the adjudicative process and risk tainting the litigation. Disqualification eliminates these risks and is warranted.”

Meta risk related: “Mark Zuckerberg’s Team Reprimanded for Wearing Meta Glasses to Court.”

“Supreme Court adopts automated recusal software to avoid ethics conflicts” —

• “The Supreme Court said Tuesday [2/17] that it will start using software to assist in justices’ decisions to recuse themselves from cases that present a potential conflict of interest.”
  “A brief press release issued by the court described an electronic matching process already used by some lower courts to compare a
• case’s parties to lists judges assemble of individuals and organizations they have ties to. A 2023 code of conduct statement from the justices said they were considering adopting such a tool themselves.”
• “‘This software will be used to run automated recusal checks by comparing information about parties and attorneys in a case with lists created by each Justice’s chambers,’ the press release said. ‘The system was designed and created by the Court’s Office of Information Technology in cooperation with the Court’s Legal Office and Clerk’s Office.'”
• “The court announced it was embracing the software as it rolled out tweaks to its rules that instructed parties to include their stock ticker symbols in filings to be used by the new software.”
• “Gabe Roth, who heads the court reform organization Fix the Court, said Tuesday’s announcement was a positive step, but noted that lower courts have been using similar software since 2007 and questioned why it took more than two years for the justices to embrace the tool they said they were considering in 2023.”
• “The Supreme Court’s approach to ethics is notoriously opaque, and the 2023 statement came only after an unprecedented scrutiny of lavish trips taken by members of the court — and particularly, Justice Clarence Thomas — that went unreported on financial disclosure forms, despite being subsidized by others. Justices Sonia Sotomayor and Neil Gorsuch have also been criticized for not recusing in cases that involved the publishing companies that financed their book deals.”
• “The justices police their own obligations to judicial ethics, with no outside body holding them accountable to the rules that govern the rest of the judiciary.”
• “While justices will publicly indicate that they have recused from a case, only some will also give any sort of reason for why they’re doing so.”

Last week, the Bressler Risk Blog reached out to the noted Supreme Court contact for comment and detail on the software itself. At this time, no comments or clarifications have been provided.

When I’ve spoken with many of you about risk software strategy — and in this context I mean new business acceptance — one question consistently looms large: The Cloud. (With AI interest starting to bubble up a bit more these days…)

I’ve heard plenty of anecdotal stories about cloud benefits, costs, opportunities, worries, hopes, dreams, and risks. So the timing feels right to run another Bressler Risk Blog experiment and conduct a new survey. Starting today, qualified participants are invited to participate in the BRB Cloud Risk Software Adoption Survey.

A SAFE PLACE FOR SURVEYING

I want to make it clear that this is an independent survey, untouched by any vendor.

It’s open to all blog readers, regardless of role or title, who work at law firms with at least 100 lawyers, and those of you at similarly sized accounting and consulting firms. (I know you accounting and consulting risk readers are out there! And that the salary surveys have felt a bit exclusionary.)

Similarly, whether you run business intake/conflicts on Aderant, Elite, Fulcrum, Intapp, or iManage — or are planning to move from one on-premises vendor to the another in the cloud — I want to hear from you!

This survey aims to generate valuable aggregate data, and gather helpful peer commentary and feedback.

As I’ve done with the risk salary surveys, responses will be incorporated into the final report in aggregate, without identifying participants. Data will not be shared with any third party — I take your trust and confidentiality concerns quite seriously.

SURVEY TOPICS

Here are the questions, topics, and themes this survey aims to explore and illuminate:

• What’s risk software adoption landscape breakdown today in terms of cloud vs. on premises?
• What’s market penetration like in terms of vendors?

• For firms that have made the jump to the cloud, what was the experience like?
  • How long did the journey take?
  • What costs came with the switch? (Both hard, like additional license fees and consulting services expenses, and soft, like internal resources and change management.)
  • What have the results been?
  • Any amazing advantages? “Home Run” ROI wins? Unexpected barriers, challenges, or lessons learned?
    • In particular, are you using amazing cloud-only features today (e.g. AI)?
• Who have you used for cloud software services migration work (vendor or third party)?
  • What was that experience like?
  • What advice would you give to peers when it comes to selecting and working with vendor or third-party consultants?

• For firms that have NOT yet made the jump to the cloud, what’s you plan?
  • Do you have specific plans and timing in mind to shift? Or are you planning to hold on to on-premises as long as feasible?
  • What are the drivers keeping you on premises/pushing you to make the case to migrate?
  • How expensive do you think migration will be in terms of license uplift, consulting services, and other internal costs?
  • How much time do you think it will take?

SERIOUS ABOUT SURVEY SUCCESS

Will see if we get enough critical mass to generate interesting quantitative or qualitative insight. This only works if people play.

Similarly, I’m not sure at this time if there will be any path for non-participants to get access to the final report. (Many non-participants in the salary survey are finding paths to the results, either by paying a fee for a report/personal benchmark, or via the sponsor channel. I’m increasingly cautious about creating a tragedy of the commons situation…)

So the best way to ensure that you can see the results of this cloud adoption survey, is to participate and contribute to this exercise in good faith!

To support that, as I know that some want to know what they’re getting into before they start a survey, I’ll note that the question set is a more polished distillation of the bulleted list above.

TO ACCESS THE SURVEY

With that, I’m excited to see how this particular experiment plays out. (Maybe there will be more risk experiments in 2026…)

Qualified participants can access the survey here: https://www.surveyhero.com/c/vabtyyzg

Questions? Comments? Feel free to reach out!

“Exxon Drops Paul Weiss, Shifts Climate Suits Defense Work” —

• “Exxon Mobil Corp. is replacing Paul Weiss as its lead legal counsel in US climate change litigation and giving the work to boutique law firm Hueston Hennigan.”
• “The company is making the move for cost purposes and wants more engaged outside counsel at the trial level, according to three people familiar with the matter, who requested anonymity to discuss a change that hasn’t been announced.”
• “The swap in the company’s national coordinating counsel is not related to revelations early this month that former Paul Weiss leader Brad Karp assisted disgraced financier Jeffrey Epstein, according to the people. The disclosures in Justice Department files prompted Karp to step down from his chairman role on Feb. 4.”
• “The move comes as sprawling climate change cases against Exxon and other oil giants play out in different courts, and after Paul Weiss cemented its position as a corporate counsel for Exxon rival Chevron Corp.”
• “Chevron tapped Paul Weiss to handle several major engagements since Barshay was hired, such as its $5 billion acquisition of Noble Energy Inc. in 2020 and an ill-fated $33 billion bid for Anadarko Petroleum Corp. the year prior.”
• “Exxon and Chevron developed a schism in late 2023 that involved access to offshore oilfields in Guyana. Exxon filed an arbitration case that was called one of the most notable disputes in the energy industry in decades.”
• “Exxon lost the 20-month feud and now shares Guyana’s oil-rich coastal waters, a region that neighbors Venezuela, with Chevron and Cnooc Ltd., a Chinese company that merged its arbitration claims with Exxon.”
• “Exxon, however, was never directly adverse to Chevron in the arbitration proceeding, although the latter supported Hess in the matter, said two people familiar with the dispute. Paul Weiss has sought to de-conflict its position between oil and gas titans by handling litigation for Exxon and deal work for Chevron, an arrangement that in the insular US energy sector is not unusual.”
• “‘It’s not uncommon to be friends and allies on one deal and enemies on yet another,’ said Ed Hirs, an energy industry expert at the University of Houston.”
• “Christopher Kulander, a senior lecturer at the University of Texas School of Law and of counsel at Houston’s Oliva Gibbs, said energy companies tend to be most concerned about conflicts in litigation, not deal work, and that despite bitter disagreements on some issues there can still be cooperation elsewhere.”

“Your AI Conversations Are Not Privileged: What a New SDNY Ruling Means for Every Lawyer and Client” —

• “A federal judge just confirmed what many suspected, but few wanted to hear: conversations with AI tools are not protected by attorney-client privilege. On February 10, in United States v. Heppner, Judge Jed Rakoff of the Southern District of New York ruled that dozens of documents a criminal defendant generated using a non-enterprise consumer version of Anthropic’s Claude are neither privileged nor protected as ‘work product.’ The decision is the first of its kind, and its reasoning should affect how every attorney advises clients about AI.”
• “(It also builds on a trend in the same court, where Judge Oetken recently ruled that 20 million ChatGPT conversation logs are likely subject to compelled production in the OpenAI copyright litigation, finding that users have a ‘diminished privacy interest’ in their AI conversations.)”
• “Bradley Heppner, a Dallas financial services executive charged with securities fraud and wire fraud, used the popular AI LLM Claude to research legal questions related to the government’s investigation after receiving a grand jury subpoena and engaging counsel, but before his arrest. He fed information he had learned from his defense counsel at Quinn Emanuel into the AI tool, generated 31 documents of prompts and responses, and then transmitted those documents to his lawyers. When the FBI seized the documents during a search of Heppner’s home, his attorneys asserted the attorney-client privilege and work-product protection.”
• “No attorney was involved. An AI tool is not a lawyer. It has no law license, owes no duty of loyalty, cannot form an attorney-client relationship, and is not bound by confidentiality obligations or professional responsibility rules. Discussing legal matters with an AI platform is legally no different from talking through your case with a friend.”
• “Not for the purpose of obtaining legal advice. Anthropic’s own public materials state that Claude follows the principle of choosing the ‘response that least gives the impression of giving specific legal advice.’ The tool explicitly disclaims providing legal services. You cannot claim you used a tool for legal advice when the tool itself says it does not provide it. Claude’s terms were specifically highlighted by the government, which directly undermined the claim that Heppner was seeking legal advice from the tool.”
• “Not confidential. This is the finding with the broadest implications. Anthropic’s policy expressly states that user prompts and outputs may be disclosed to ‘governmental regulatory authorities’ and used to train the AI model. Judge Rakoff found there was simply no reasonable expectation of confidentiality. As he put it, the tool ‘contains a provision that any information inputted is not confidential.'”
• “This is not unique to Claude. OpenAI’s privacy policy contains comparable provisions permitting data use for model training and disclosure in response to legal process. And the distinction between free and paid plans matters less than many assume. Both Anthropic and OpenAI use conversations from free and individual paid plans (Claude Free, Pro, and Max; ChatGPT Free, Plus, and Pro) for model training by default. Users can opt out, but opting out of training does not eliminate the platforms’ rights to disclose data to government authorities or in response to legal process. Only enterprise-tier agreements (ChatGPT Enterprise and Business; Claude’s commercial and government plans) exclude user data from training by default and offer contractual confidentiality protections. A $20-per-month subscription does not buy you privilege.”
• “Pre-existing documents cannot be retroactively cloaked in privilege. The AI-generated documents were created by Heppner before he transmitted them to counsel. Sending these unprivileged materials to his lawyers after the fact did not retroactively make them privileged. This is a long-settled principle that applies equally to AI outputs.”
• “The work-product doctrine fared no better. Defense counsel conceded that Heppner created the documents ‘of his own volition’ and that the legal team ‘did not direct’ him to run the AI searches. Without attorney direction, work-product protection does not attach. As the government noted, if counsel had directed Heppner to run the AI searches, the analysis might be different.”
• “Judge Rakoff flagged a practical complication the government may not have anticipated. Because the AI documents incorporate information counsel conveyed to Heppner, using those documents at trial could require Heppner’s lawyers to testify about what they told their client. That witness-advocate conflict could cause all kinds of complications. Winning on privilege, the judge warned, does not make the evidentiary picture simple.”
• “Perhaps the most troubling aspect of the ruling is its implication for waiver. Heppner fed information he had received from his attorneys into Claude. The government argued, and Judge Rakoff agreed, that sharing privileged communications with a third-party AI platform may constitute a waiver of the privilege over the original attorney-client communications themselves. The privilege belongs to the client, but so does the responsibility to maintain it.”
• “If you are an attorney: Advise clients explicitly that anything they input into an AI tool may be discoverable and is almost certainly not privileged. Consider putting this in your engagement letters. Make it part of client onboarding. Do not assume clients understand the distinction between a private-feeling interface and an actual confidential communication.”
• “If you manage legal risk: Audit your organization’s AI usage policies. Consumer-grade AI tools with standard terms of service offer no confidentiality protections. Enterprise agreements with contractual confidentiality provisions may change the analysis, but standard accounts do not.”
• “If you use AI for legal work: Understand that the conversational interface creates a dangerous illusion of privacy. Every prompt is a potential disclosure. Every output is a potentially discoverable document.”

“ABA Formal Opinion 521 Re: Judicial Canons of Ethics applying to administrative, supervisory role” —

• “The American Bar Association Standing Committee on Ethics and Professional Responsibility released a formal opinion that provides guidance on the ethical obligations of judges under the ABA Model Code of Judicial Conduct when exercising administrative, employment and supervisory authority.”
• “Formal Opinion 521 says that the canons and rules governing impartiality, integrity and independence — particularly Canons 1 and 2 and associated rules — require judges to administer chambers and court staff with the same fairness and neutrality that guide adjudication. This opinion explains that ethical duties extend beyond the courtroom to include merit-based appointments, the prevention of bias and harassment and the avoidance of favoritism or the appearance of impropriety in all administrative decisions. Judges fulfill these obligations by ensuring that their use of administrative authority promotes public confidence in the judiciary’s independence and integrity.”
• “The opinion notes that ‘Judges occupy a unique public trust: they must decide controversies impartially and must also administer the courts in a manner that sustains the public’s confidence in the independence, integrity and impartiality of the judiciary.’ The Model Code of Judicial Conduct makes plain that those obligations reach beyond adjudication to embrace the full scope of judicial administration. Canon 1 and Rule 1.2 require judges to avoid impropriety and the appearance of impropriety; Canon 2 and Rule 2.3 require that judges perform all duties of office — adjudicative, administrative and supervisory — without bias or prejudice; Rule 2.12 imposes affirmative supervisory duties; and Rule 2.13 requires that appointments be made impartially and on the basis of merit. Together, these provisions create an affirmative, institutionally focused ethical mandate: judges must ensure that both their own conduct and the conduct of those they supervise preserve the fairness and legitimacy of the courts.”
• “Applied here, that mandate means (1) avoiding administrative actions that convey favoritism, partiality or the use of judicial prestige for private ends; (2) making hiring, appointment and personnel decisions on objective, merit-based criteria; and (3) actively supervising and correcting discriminatory, harassingor retaliatory conduct within chambers. The illustrations in this opinion demonstrate how apparently discrete administrative acts (or the failure to act) — when motivated by nepotism, ideology or personal loyalty —can produce precisely the appearance of partiality that the code forbids and how patterns of such conduct can erode institutional integrity even where no single act violates a particular rule.”
• “This opinion affirms that preserving public confidence in the judiciary requires attention to both substance and perception. Judicial fairness must be real, and it must be seen to be real. When judges administer their chambers with impartiality, competence and diligence, they not only fulfill individual ethical obligations but also strengthen the judiciary’s collective standing as an institution worthy of public trust.”
• “The standing committee periodically issues ethics opinions to guide lawyers, courts and the public in interpreting and applying ABA Model Rules of Professional Conduct. Other recent ABA ethics opinions are available here.”